Cus­tomers and cor­po­rate de­pos­i­tors started to panic af­ter the Cen­tral Bank of Cyprus is­sued an an­nounce­ment late Mon­day say­ing it had is­sued a de­cree by which it has placed the Cyprus branch of FBME Bank Ltd. un­der a state of res­o­lu­tion.

The Fi­nan­cial Mir­ror re­ceived sev­eral calls from con­cerned cus­tomers who were not re­as­sured by the cen­tral bank’s state­ments, as some sought to with­draw their de­posits, for fear of a rep­e­ti­tion of last year’s “bail in” im­posed on savers by the Eurogroup to res­cue Bank of Cyprus.

“The pur­pose of the de­cree is the sale of the op­er­a­tions of the [FBME] branch with the aim of the pro­tec­tion of de­pos­i­tors,” said Mon­day’s de­cree, pub­lished in the of­fi­cial Gazette of the Repub­lic and signed by the Gover­nor Chrys­talla Ge­orghadji, CBC Coun­cil mem­ber Ste­lios Koil­iaris and Se­nior Man­ager Yior­gos Syrichas.

Last week, a US Trea­sury re­port im­pli­cated the bank in money laun­der­ing.

“FBME was in­volved in at least 4,500 sus­pi­cious wire trans­fers through U.S. cor­re­spon­dent ac­counts that to­talled at least $875 mln be­tween Novem­ber 2006 and March 2013,” the re­port said.

The lender sought to clar­ify its po­si­tion with an an­nounce­ment say­ing that “as a re­sult of the fi­nan­cial un­cer­tainty in Cyprus in the past two years, FBME Bank com­mis­sioned a de­tailed as­sess­ment by the Ger­man of­fice of a leading in­ter­na­tional ac­coun­tancy firm into its op­er­a­tions and prac­tices, which found that the Bank’s ser­vices are in­deed in com­pli­ance with ap­pli­ca­ble anti-money laun­der­ing rules of the Cen­tral Bank of Cyprus and the Euro­pean Union”.

The cri­sis first erupted on Fri­day when the cen­tral bank an­nounced that it had taken over the man­age­ment of the op­er­a­tions of the branch of the Federal Bank of the Mid­dle East (FBME), fol­low­ing al­le­ga­tions money laun­der­ing by a fi­nan­cial crime unit of the U.S. govern­ment.

The CBC noted that “un­der the pow­ers con­ferred to it by the rel­e­vant leg­is­la­tion, has taken over the man­age­ment of the op­er­a­tions of the branch of FBME Bank Ltd in Cyprus”.

The Fi­nan­cial Crimes En­force­ment Net­work (FinCEN) of the U.S. Trea­sury had said ear­lier on Thurs­day that FBME had fa­cil­i­tated a “sub­stan­tial vol­ume” of money laun­der­ing through the bank for many years and had sys­temic fail­ures in its anti-money laun­der­ing (AML) con­trols.

Al­though the bank is head­quar­tered in Tan­za­nia, most of its ac­tiv­i­ties are car­ried out through its Cypriot branch, FinCEN said. The pri­vately-held bank is­sued a state­ment say­ing it would co­op­er­ate with the Cypriot reg­u­la­tor, but said that it is “shocked by the con­tent of the US Depart­ment of the Trea­sury no­tice re­lat­ing to the bank, dated 15 July, that sets out un­ex­plained al­le­ga­tions of weak AML con­trols.”

The bank added in the state­ment that it had no prior no­ti­fi­ca­tion of this an­nounce­ment nor did have the op­por­tu­nity to com­ment on or re­fute the var­i­ous al­le­ga­tions set out in it.

“The an­nounce­ment is all the more sur­pris­ing be­cause, as a re­sult of the fi­nan­cial un­cer­tainty in Cyprus in the past two years, FBME Bank com­mis­sioned a de­tailed as­sess­ment by the Ger­man of­fice of a leading in­ter­na­tional ac­coun­tancy firm into its op­er­a­tions and prac­tices, which found that the bank’s ser­vices are in­deed in com­pli­ance with ap­pli­ca­ble AML rules of the Cen­tral Bank of Cyprus and the Euro­pean Union,” it said.

FBME Bank added that “it wel­comes the in­volve­ment of its reg­u­la­tor, is co­op­er­at­ing fully with it and re­it­er­ates its ab­so­lute con­tin­ued com­mit­ment to full com­pli­ance with ap­pli­ca­ble laws and reg­u­la­tions.”

The bank con­cluded that “it continues to com­ply with Euro­pean Cap­i­tal Ad­e­quacy and Liq­uid­ity Stan­dards and other healthy bal­ance sheet ra­tios.”

FinCEN said a large shell com­pany cus­tomer base fa­cil­i­tated in­ter­na­tional ter­ror­ist fi­nanciers and in­ter­na­tional nar­cotics traf­fick­ing, in­clud­ing the eva­sion of sanc­tions on coun­tries such as Syria.

“FBME solic­its and is recog­nised by its high-risk cus­tomers for its ease of use,” FinCEN said in its re­port.

Cypriot au­thor­i­ties found FBME’s com­pli­ance with Cypriot bank­ing laws and anti-money laun­der­ing reg­u­la­tions de­fi­cient on at least two oc­ca­sions, the U.S. agency said.

It also said the bank came un­der scru­tiny by Cypriot au­thor­i­ties in 2013 for al­legedly cir­cum­vent­ing cur­rency con­trols, im­posed by Cyprus in the wake of the in­ter­na­tional bailout in March last year.

FBME Bank was es­tab­lished its Ni­cosia as a sub­sidiary of the Federal Bank of Le­banon SAL. In 1986 it changed its coun­try of in­cor­po­ra­tion to the Cay­man Is­lands and its bank­ing pres­ence in Cyprus was trans­formed to that of a branch of the Cay­man Is­lands en­tity.

In 2003 FBME Bank ter­mi­nated its bank­ing pres­ence in the Cay­man Is­lands and es­tab­lished its par­ent com­pany and op­er­a­tional head­quar­ters in Tan­za­nia. At the same time, its Cyprus bank­ing op­er­a­tions be­came a branch of FBME Bank, Tan­za­nia.

As of Septem­ber 2013, FBME was the largest commercial bank in Tan­za­nia, with a to­tal ap­prox­i­mately US$2.72 bln, with ap­prox­i­mately US$179.63 mln.

The bank is fam­ily owned owned by A-F M Saab and F M Saab and main­tains two branches in Cyprus, four in Tan­za­nia and a rep­re­sen­ta­tive of­fice in Moscow.

In 2005, FBME also ex­panded into card ser­vices and is the only al­ter­na­tive to JCC Pay­ment Sys­tems, the card pay­ment sys­tem wholly owned by the Cypriot banks.

Mean­while, in state­ments to the Beirut Daily Star, FBME Chair­man Ay­oub-Farid Saab said that the bank had re­quested the Cypriot ac­tion in or­der to clear it­self of the “un­founded” al­le­ga­tions.

“We asked the Cypriot au­thor­i­ties to man­age our bank to see [with] their own eyes that there is noth­ing wrong in our branch. All these al­le­ga­tions against us are un­founded,” he said.

The U.S. Trea­sury Thurs­day ac­cused FBME, which though char­tered in Tan­za­nia op­er­ates pri­mar­ily in Cyprus, of fa­cil­i­tat­ing fi­nan­cial ac­tiv­ity for transna­tional or­ga­nized crime and Hezbol­lah, call­ing it a “pri­mary money laun­der­ing con­cern.”

The Federal Bank of Le­banon, owned by broth­ers Ay­oubFarid Saab and Fadi Saab, is not named in the Trea­sury Depart­ment re­port.

Ay­oub-Farib Saab in­sisted that the Federal Le­banon was not in­volved in the FBME is­sue.

“We have two sep­a­rate boards of di­rec­tors. There are no prob­lems with the Federal Bank of Le­banon and we are co­op­er­at­ing with the Cen­tral Bank,” he said, adding that he had met with Le­banese cen­tral bank of­fi­cials on Fri­day and would be is­su­ing a state­ment on the bank’s web­site at the weekend. Saab de­nied that the Federal Bank of Le­banon would be af­fected or forced to sell over FBME’s prob­lems. as­set base share­hold­ers’ val­ued eq­uity